Flexsteel Industries, Inc. Reports Fiscal Fourth Quarter and Full Year 2023 Results
- Gross margin increased to 20.0% for the quarter
- Full-year cash flow from operations of $23 million
- CEO confident in long-term growth outlook
- Net sales for the quarter decreased 15.0% to $105.8 million
Key Results for the Fourth Quarter and Full Year Ended June 30, 2023
-
Net sales for the quarter decreased (
15.0% ) to compared to$105.8 million in the prior year quarter. For the year, net sales decreased ($124.5 million 27.7% ) to compared to$393.7 million in the prior year.$544.3 million -
Fourth quarter net sales grew
6.8% sequentially compared to in the third quarter, which similarly grew$99.1 million 6.4% sequentially compared to in the second quarter.$93.1 million -
Gross margin increased to
20.0% for the fourth quarter and18.0% for the year compared to14.2% in the prior year quarter and13.4% for the prior year. -
GAAP operating income of
or$4.2 million 4.0% of net sales for the fourth quarter and operating income of or$10.5 million 2.7% of net sales for the year compared to or$3.6 million 2.9% of net sales in the prior year quarter and or$6.6 million 1.2% of net sales for the prior year. -
GAAP net income per diluted share of
for the current quarter and net income per diluted share of$1.91 for the current year compared to net loss of ($2.74 ) in the prior year quarter and net income of$0.05 in the prior year.$0.28 -
Non-GAAP1 net income per diluted share of
for the quarter and$0.36 for the year compared to net income of$0.87 in the prior year quarter and$0.41 in the prior year.$0.64 -
Full year cash flow from operations of
.$23 million
1GAAP to non-GAAP reconciliations follow the financial statements in this press release
Management Commentary
“I am pleased with our fourth quarter financial results. The continued focus on our growth initiatives enabled us to deliver another quarter of solid sequential sales growth as fourth quarter results climbed
“To summarize fiscal year 2023, our team was presented with several hurdles that we had to rise above, most notably a return to pre-pandemic demand levels which was exacerbated by an additional curb in consumer demand due to higher interest rates, rising inflation, and general economic uncertainty. At the same time, the industry experienced pervasive price reductions as many manufacturers and retailers quickly dropped prices in response to lower ocean freight and other cost inputs, forcing others to follow suit. The downward shift in demand early in the year also left many retailers with an oversupply of inventory which subsequently created additional pricing pressures across the industry. Despite the significant decline in year over year sales caused by these challenges, our strong team of dedicated employees identified the obstacles early and executed plans to navigate them while delivering profitable growth, which resulted in higher full year operating income of
At the same time we made important strides in advancing our strategic growth initiatives: expanding our big box distribution channel, introducing our Zecliner™ sleep solutions recliner and flex™, our contemporary modular furniture solution, and launching the new Charisma brand. We are also proud to have published our first annual ESG report which can be found on our website at www.flexsteelindustries.com. This report lays out the foundation of our approach to environmental, social and governance matters while formalizing our ongoing commitment to sustainable and responsible business practices.”
Mr. Dittmer concludes, “While external conditions remain uncertain, I am confident that our long-term growth outlook remains promising. Our team’s commitment to profitable growth, combined with our market momentum, have positioned us to successfully deliver improved earnings and an even stronger balance sheet in fiscal year 2024. We are focused on executing our strategic growth initiatives, investing in future innovation and other competitive advantages, and delivering sustainable profit improvement through operational efficiencies while continuing to reduce inventory levels and pay down debt. In summary, we’re enthusiastic about fiscal year 2024 and the long-term growth opportunities for the Company while being attentive to navigating near-term ambiguity in the economy and furniture industry outlook.”
Operating Results for the Fourth Quarter Ended June 30, 2023
Net sales were
Gross margin as a percent of net sales for the quarter ended June 30, 2023, was
Selling, general and administrative (SG&A) expenses increased to
Operating income for the quarter ended June 30, 2023, was
The Company reported net income of
The Company reported income tax benefit of
Liquidity
The Company ended the quarter with a cash balance of
Capital expenditures for the year ended June 30, 2023, were
Conference Call and Webcast
The Company will host a conference call and audio webcast with analysts and investors on Tuesday, August 22, 2023, at 8:00 a.m. Central Time to discuss the results and answer questions.
- Live conference call: 866-777-2509 (domestic) or 412-317-5413 (international)
- Conference calls replay available through August 29, 2023: 877-344-7529 (domestic) or 412-317-0088 (international)
- Replay access code: 8427483
- Live and archived webcast: ir.flexsteel.com
To pre-register for the earnings conference call and avoid the need to wait for a live operator, investors can visit https://dpregister.com/sreg/10181590/fa21e4d4f2 and enter their contact information. Investors will then be issued a personalized phone number and pin to dial into the live conference call.
About Flexsteel
Flexsteel Industries, Inc., and Subsidiaries (the “Company”) is one of the largest manufacturers, importers, and marketers of residential furniture products in
Forward-Looking Statements
Statements, including those in this release, which are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are certain important factors that could cause our results to differ materially from those anticipated by some of the statements made herein. Investors are cautioned that all forward-looking statements involve risk and uncertainty. Some of the factors that could affect results are the cyclical nature of the furniture industry, supply chain disruptions, litigation, the effectiveness of new product introductions and distribution channels, the product mix of sales, pricing pressures, the cost of raw materials and fuel, changes in foreign currency values, retention and recruitment of key employees, actions by governments including laws, regulations, taxes and tariffs, the amount of sales generated and the profit margins thereon, competition (both
For more information, visit our website at http://www.flexsteel.com.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) |
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June 30, |
||||
|
|
2023 |
|
2022 |
||
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,365 |
|
$ |
2,184 |
Trade receivables, net |
|
|
38,168 |
|
|
41,106 |
Inventories |
|
|
122,076 |
|
|
141,212 |
Other |
|
|
6,417 |
|
|
4,950 |
Assets held for sale |
|
|
616 |
|
|
616 |
Total current assets |
|
|
170,642 |
|
|
190,068 |
|
|
|
|
|
|
|
NONCURRENT ASSETS: |
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
38,652 |
|
|
38,543 |
Operating lease right-of-use assets |
|
|
68,294 |
|
|
38,189 |
Other |
|
|
12,962 |
|
|
1,941 |
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
290,550 |
|
$ |
268,741 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
Accounts payable - trade |
|
$ |
24,745 |
|
$ |
32,147 |
Accrued liabilities |
|
|
30,360 |
|
|
32,480 |
Total current liabilities |
|
|
55,105 |
|
|
64,627 |
|
|
|
|
|
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
Lines of credit |
|
|
28,273 |
|
|
37,739 |
Other liabilities |
|
|
65,551 |
|
|
34,815 |
Total liabilities |
|
|
148,929 |
|
|
137,181 |
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
141,621 |
|
|
131,560 |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
$ |
290,550 |
|
$ |
268,741 |
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands, except per share data) |
||||||||||||||||
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Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net sales |
|
$ |
105,819 |
|
|
$ |
124,517 |
|
|
$ |
393,692 |
|
|
$ |
544,282 |
|
Cost of goods sold |
|
|
84,704 |
|
|
|
106,845 |
|
|
|
322,745 |
|
|
|
471,602 |
|
Gross margin |
|
|
21,115 |
|
|
|
17,672 |
|
|
|
70,947 |
|
|
|
72,680 |
|
Selling, general and administrative |
|
|
16,879 |
|
|
|
14,091 |
|
|
|
62,846 |
|
|
|
66,733 |
|
Restructuring expense |
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
730 |
|
Environmental remediation |
|
|
— |
|
|
|
— |
|
|
|
(2,788 |
) |
|
|
— |
|
(Gain) on disposal of assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,400 |
) |
Other expense |
|
|
— |
|
|
|
— |
|
|
|
347 |
|
|
|
— |
|
Operating income |
|
|
4,236 |
|
|
|
3,566 |
|
|
|
10,542 |
|
|
|
6,617 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income |
|
|
7 |
|
|
|
5 |
|
|
|
18 |
|
|
|
121 |
|
Interest (expense) |
|
|
(444 |
) |
|
|
(233 |
) |
|
|
(1,341 |
) |
|
|
(835 |
) |
Total other (expense) |
|
|
(437 |
) |
|
|
(228 |
) |
|
|
(1,323 |
) |
|
|
(714 |
) |
Income before income taxes |
|
|
3,799 |
|
|
|
3,338 |
|
|
|
9,219 |
|
|
|
5,903 |
|
Income tax (benefit) expense |
|
|
(6,362 |
) |
|
|
3,609 |
|
|
|
(5,559 |
) |
|
|
4,050 |
|
Net income (loss) |
|
$ |
10,161 |
|
|
$ |
(271 |
) |
|
$ |
14,778 |
|
|
$ |
1,853 |
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
5,150 |
|
|
|
5,470 |
|
|
|
5,225 |
|
|
|
6,329 |
|
Diluted |
|
|
5,314 |
|
|
|
5,470 |
|
|
|
5,385 |
|
|
|
6,503 |
|
Earnings (loss) per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
1.97 |
|
|
$ |
(0.05 |
) |
|
$ |
2.83 |
|
|
$ |
0.29 |
|
Diluted |
|
$ |
1.91 |
|
|
$ |
(0.05 |
) |
|
$ |
2.74 |
|
|
$ |
0.28 |
|
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) |
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For the years ended June 30, |
||||||
|
|
2023 |
|
2022 |
||||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net income |
|
$ |
14,778 |
|
|
$ |
1,853 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
4,572 |
|
|
|
5,171 |
|
Deferred income taxes |
|
|
(7,154 |
) |
|
|
— |
|
Stock-based compensation expense |
|
|
3,191 |
|
|
|
1,020 |
|
Changes in (recoveries) for losses on accounts receivable |
|
|
(380 |
) |
|
|
(260 |
) |
(Gain) on disposition of capital assets |
|
|
(313 |
) |
|
|
(1,782 |
) |
Changes in operating assets and liabilities |
|
|
8,295 |
|
|
|
1,991 |
|
Net cash provided by operating activities |
|
|
22,989 |
|
|
|
7,993 |
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from sale of capital assets |
|
|
340 |
|
|
|
1,937 |
|
Capital expenditures |
|
|
(4,790 |
) |
|
|
(3,853 |
) |
Net cash (used in) investing activities |
|
|
(4,450 |
) |
|
|
(1,916 |
) |
FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Dividends paid |
|
|
(3,241 |
) |
|
|
(3,911 |
) |
Treasury stock purchases |
|
|
(3,700 |
) |
|
|
(35,052 |
) |
Proceeds from lines of credit |
|
|
363,805 |
|
|
|
265,093 |
|
Payments on lines of credit |
|
|
(373,271 |
) |
|
|
(230,854 |
) |
Proceeds from issuance of common stock |
|
|
— |
|
|
|
117 |
|
Shares withheld for tax payment on invested shares and options exercised |
|
|
(951 |
) |
|
|
(628 |
) |
Net cash (used in) financing activities |
|
|
(17,358 |
) |
|
|
(5,235 |
) |
Increase in cash and cash equivalents |
|
|
1,181 |
|
|
|
842 |
|
Cash and cash equivalents at beginning of period |
|
|
2,184 |
|
|
|
1,342 |
|
Cash and cash equivalents at end of period |
|
$ |
3,365 |
|
|
$ |
2,184 |
|
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES QUARTERLY NET SALES (UNAUDITED) (in thousands, except for percent change) |
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Three Months Ended |
|
Quarter-over-Quarter % Increase/(Decrease) |
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|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
||||||||
|
2023 |
|
2023 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
|
2022 |
||||||||
Net sales |
$ |
105,819 |
|
$ |
99,052 |
|
$ |
93,137 |
|
$ |
95,684 |
|
6.8 |
% |
|
6.4 |
% |
|
(2.7 |
)% |
NON-GAAP DISCLOSURE (Unaudited)
The Company is providing information regarding adjusted net sales, adjusted net income (loss) and adjusted diluted earnings (loss) per share of common stock, which are not recognized terms under
Reconciliation of GAAP operating income to non-GAAP adjusted operating income:
The following table sets forth the reconciliation of the Company’s reported GAAP operating income to the calculation of non-GAAP adjusted operating income for the three and twelve months ended June 30, 2023, and 2022:
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|
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|
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||
|
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Three Months Ended |
|
Twelve Months Ended |
||||||||||
|
|
June 30, |
|
June 30, |
||||||||||
(in thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||
Reported GAAP operating income |
|
$ |
4,236 |
|
$ |
3,566 |
|
$ |
10,542 |
|
|
$ |
6,617 |
|
Restructuring expense |
|
|
— |
|
|
15 |
|
|
— |
|
|
|
730 |
|
Environmental remediation |
|
|
— |
|
|
— |
|
|
(2,788 |
) |
|
|
— |
|
(Gain) on disposal of assets |
|
|
— |
|
|
— |
|
|
— |
|
|
|
(1,400 |
) |
Other expense |
|
|
— |
|
|
— |
|
|
347 |
|
|
|
— |
|
Non-GAAP operating income |
|
$ |
4,236 |
|
$ |
3,581 |
|
$ |
8,101 |
|
|
$ |
5,947 |
|
Reconciliation of GAAP net income (loss) to non-GAAP adjusted net income:
The following table sets forth the reconciliation of the Company’s reported GAAP net income (loss) to the calculation of non-GAAP adjusted net income for the three and twelve months ended June 30, 2023, and 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||
(in thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Reported GAAP Net income (loss) |
|
$ |
10,161 |
|
|
$ |
(271 |
) |
|
$ |
14,778 |
|
|
$ |
1,853 |
|
Restructuring expense |
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
730 |
|
Other expense |
|
|
— |
|
|
|
— |
|
|
|
347 |
|
|
|
— |
|
(Gain) on disposal of assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,400 |
) |
Environmental remediation |
|
|
— |
|
|
|
— |
|
|
|
(2,788 |
) |
|
|
— |
|
Tax impact of adjustments(1) |
|
|
— |
|
|
|
(16 |
) |
|
|
614 |
|
|
|
460 |
|
Expiring state tax credits |
|
|
1,577 |
|
|
|
— |
|
|
|
1,577 |
|
|
|
— |
|
Remeasurement of deferred tax assets and valuation allowance |
|
|
(9,838 |
) |
|
|
2,518 |
|
|
|
(9,838 |
) |
|
|
2,518 |
|
Non-GAAP Net income |
|
$ |
1,900 |
|
|
$ |
2,246 |
|
|
$ |
4,690 |
|
|
$ |
4,161 |
|
(1) Effective tax rate of |
Reconciliation of GAAP income (loss) per share of common stock to non-GAAP adjusted earnings per share of common stock:
The following table sets forth the reconciliation of the Company’s reported GAAP income (loss) earnings per share to the calculation of non-GAAP adjusted earnings per share for the three and twelve months ended June 30, 2023, and 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Reported GAAP Diluted income (loss) per share |
|
$ |
1.91 |
|
|
$ |
(0.05 |
) |
|
$ |
2.74 |
|
|
$ |
0.28 |
|
Restructuring expense |
|
|
— |
|
|
|
0.00 |
|
|
|
— |
|
|
|
0.11 |
|
Other expense |
|
|
— |
|
|
|
— |
|
|
|
0.06 |
|
|
|
— |
|
(Gain) on disposal of assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.22 |
) |
Environmental remediation |
|
|
— |
|
|
|
— |
|
|
|
(0.52 |
) |
|
|
— |
|
Tax impact of adjustments(1) |
|
|
— |
|
|
|
(0.00 |
) |
|
|
0.11 |
|
|
|
0.07 |
|
Expiring state tax credits |
|
|
0.30 |
|
|
|
— |
|
|
|
0.29 |
|
|
|
— |
|
Remeasurement of deferred tax assets and valuation allowance |
|
|
(1.85 |
) |
|
|
0.46 |
|
|
|
(1.83 |
) |
|
|
0.39 |
|
Non-GAAP Diluted earnings per shares |
|
$ |
0.36 |
|
|
$ |
0.41 |
|
|
$ |
0.87 |
|
|
$ |
0.64 |
|
Note: The table above may not foot due to rounding. |
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(1) Effective tax rate of |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230821135959/en/
Derek Schmidt, Flexsteel Industries, Inc.
563-585-8122
investors@flexsteel.com
Source: Flexsteel Industries, Inc.